Durham Mortgage Broker Tip – Fixed or Adjustable Rate Mortgage?

As a Durham mortgage broker, I am always watching to see what the latest news is relating to our industry.

The mortgage news today is about 30-Year Fixed Mortgage Rates, with good reason. They are very low.

But what if you will be living in your home for 11 years or less? Or, what if you would like to qualify for more home than you can on a fixed rate?

Or, what if you need super low mortgage payments to save for kids college education?

Or, what if lower mortgage payments will help you save faster for retirement?

As low as Fixed Mortgage Rates are, a program that should be reviewed
is the 10/1 Adjustable Rate Mortgage.

Even if you ultimately say NO.

This is a 30-year amortization, with a 10 year fixed period.
Beginning year 11, it becomes a one-year adjustable.

What!? No worries.
The plan is for you to be out of the loan by year 11 or 12.

30 Year Fixed rate loans today are around 3.375% (3.465 APR) with some closing costs.
A 10/1 ARM is 2.5% (2.805APR) with some closing costs.

What’s that mean in dollars and sense?

On a $400,000.00 loan @ 3.375%, principal and interest = $1,768.38
On a $400,000.00 loan @ 2.500%, principal and interest = $1,580.48

Monthly Difference = $187.90.
Ten Year Cash Flow Savings = $22,548.00

There is also mortgage judo that can be applied to your loan, but I’ll
save that for another post.

Oh, be sure to ask about credit score and down payment requirements
on the 10/1 Adjustable Rate mortgage.

The underwriting guidelines are different than a fixed rate loan.

Have Questions? Contact a Durham mortgage banker such as myself today!

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